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2017 good for those who delivered; Sales set to witness revival in 2018

Paras Buildtech

brijeshBrijesh Bhanote
CMO, Paras Buildtech
Having seen downtrend in 2015 and 2016, the year 2017 was relatively a better year for developers who started delivering. This is because nine out of 10 transactions were happening for delivered projects where a person was getting keys of his house. So there was traction in the completed projects.

That was particularly in our case. We had project Paras Irene in Sector 70A, Gurugram, where we started delivering in the second and third quarters of 2017. The moment we started, there was so much of traction that transaction went up and we increased our pricing by Rs 750 per square foot. Before the delivery started, we were selling at Rs 5,250 per square foot, which we increased to Rs 6,000 per square feet post-delivery. At this price point also, the sale was happening. Obviously, the velocity wasn’t the same as was in Rs 5,250, but the revised price was also absorbed in the market. In residential market, only the end-user is buying. There is no investor in the market right now.
So 2017 overall, especially the later-half of the year has been relatively good as compared to what 2016 was.

There were two major policy decisions which happened in 2017 – RERA and GST, and demonetisation happened in the last quarter of 2016. The demonetisation impacted only where cash was involved in sale-purchase. Today in residential market there are only the end-users who are buying. Almost 100 per cent of these buyers are taking home loan. Also these are for primary market where there is no cash transaction happening, so demonetisation didn’t have any adverse impact on the property market.

GST was a blessing as the there is no GST on finished product, which is delivered houses. Since most of the sale today is happening on ready property, GST is proving out to be a blessing. But yes, if a project is about to be completed in six months, then 12 per cent GST is a deterrent to the sales. But as I mentioned, transactions today are happening mostly in the ready-to-move-in houses.

Of course, there are certain areas where there is a scope of improvement in GST on real estate. The Government has already reviewed GST for many sectors, and brought down the rates, and real estate sector shall get something better.

Another policy decision of 2017, RERA, was also a blessing for the sector. It will have a very definite and positive impact on the industry because all the frivolous players will no longer be there and only the serious ones will remain. The transparency which has come in with RERA is beneficial for both the buyers as well as the developers. Also with RERA in place, you know when you will get the house you are putting money into, if not, you have a recourse also.

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  • The demonetisation impacted only where cash was involved in sale-purchase. Today in residential market there are only the end-users who are buying.
  • GST was a blessing as the there is no GST on finished product, which is delivered houses. Since most of the sale today is happening on ready property, GST is proving out to be a blessing.
  • Another policy decision of 2017, RERA, was also a blessing for the sector. It will have a very definite and positive impact on the industry because all the frivolous players will no longer be there and only the serious ones will remain.
  • RERA is in initial stage now. It will mature with time as consumers, developers, as also respective states would understand what improvements are needed and where.
  • In 2018 we see a huge lot of pending deliveries happening. Once that starts, the sector will only look up from here.

Also as a result of RERA, there will be consolidation in the market, as only the good people will stay and they will not add on any inventory in future. RERA is a step towards a matured market. We have to have a regulator for any market. RERA is good not only for the buyers but also for the developers, because when we sell, many people don’t pay. Now RERA gives recourse to developers in such a case.

Having said all these, I would like to add that whenever any new thing comes in, it cannot be 100 per cent perfect. RERA is in initial stage now. It will mature with time as consumers, developers, as also respective states would understand what improvements are needed and where. In the current situation, there might be some conflict of interest between the local laws and the respective RERA provisions. But eventually all these will be ironed out. For example if a developer is saying he will deliver a project in a certain time period, how will he deliver if the approvals take place in 20 per cent of the said period. So, it a developer is accountable, the Government agencies also have to be accountable. All these shall be fine-tuned in due course. Answerability should be on everybody’s part.

The year 2018 is expected to be a better year as 2017 was better than 2016. People are buying and there is a demand for homes in the NCR. If the confidence of some buyers was shaken, they are sceptical in buying. Wherever deliveries are happening, transactions are also happening. In 2018 we see a huge lot of pending deliveries happening. Once that starts, the sector will only look up from here.

I see revival in sales and revival in consumer confidence in 2018. And this will happen due to reasons like implementation of RERA, home loans availability at 8.25 per cent. Also, the prices have bottomed out. The whole of NCR market shall see an upside in 2018. Gurugram, especially, looks promising because the delivery ratio and inventory here is much lesser when compared to Noida and Noida Extension. Also, unlike Noida, there aren’t huge issues of delivery in Gurugram.

I also expect infrastructure status for real estate sector in the Budget.

We acquired some land parcels in 2017. We expect to launch two projects in 2018, of which one is already in approval stage. Both the projects are going to be commercial located in NCR. These are for the land we have already acquired. We might also consider new projects in residential market. Going forward, we will also consider venturing in the affordable segment.

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